Foreign Funding

2. External Commercial Borrowings (ECB)

Who can borrow?

Eligible entities include borrowers allowed FDI plus additional ones: infrastructure firms, SEZ units, EXIM Bank, SIDBI, recognized NGOs/microfinance, and startups meeting criteria Routes.

• Automatic route: ECB up to USD 750 million per financial year (unchanged) or USD 1.5 million under temporary relaxations (e.g. FY 2022) for certain borrowers. No prior approval needed if within limits.
• Approval (Government) route: For exceptions or higher amounts requiring RBI/government consent.

Lender Criteria

Must be "recognized non resident lenders": FATF or IOSCO compliant entities, multilateral institutions, foreign equity holders, etc.

End use Guidelines Allowed uses (with conditions):

• Capital expenditure (e.g. capital goods imports, infrastructure)
• Infrastructure development (roads, power, hospitals, etc.)
• Refinancing existing rupee loans (partial, subject to maturity limits)
• Working capital and corporate purposes for certain firms or under equity-holder loans
• Overseas direct investment (JV/WOS) for permissible categories.

Prohibitions:

• Real estate, capital market investments, equity acquisitions
• General working capital/corporate purposes (in general)
• NBFCs/Indian banks cannot issue guarantees for ECBs.

Other compliance & limits

• Minimum Average Maturity Period (MAMP): 3–7–10-year depending on end use and borrower type.
• Borrowing cost cap: benchmark rate (e.g. LIBOR or G Sec rate) plus up to 450 bps spread; must be arm’s length for related-party loans.
• Borrower leverage ratios:
  • Under automatic route: ECB liability to foreign equity holder ≤ 4× their equity
  • Under approval route: ≤ 7× equity, unless total ECB ≤ USD 5 million.

Reporting & other rules

• Obtain Loan Registration Number (LRN) before availing funds.
• Monthly reporting using Form ECB 2 within 7 working days post-month end via AD Category I bank; late fees apply.
• Prepayment / refinancing: Prepayment up to USD 500 million permitted without prior RBI approval under conditions; refinanced ECB must maintain maturity and cost norms.
• Startups (recognised by govt): Can raise up to USD 3 million per year under automatic route; broader end uses permitted; relaxed leverage norms apply.